This study assesses the impact of wood energy use under underutilized conditions of wood resources: the impact on promotion of forest maintenance practices (FMPs), user costs, and local economies, using the case of a local initiative in Nishiwaga, Iwate, Japan. We conducted two main analyses: resource and economic assessment. For resource assessment, we investigate whether wood supply from FMP residue is sufficient to sustainably satisfy new demand created by a local initiative in Nishiwaga, and in how much forest area can FMPs be performed to satisfy the demand. These questions are analyzed by linear programming. Regarding economic assessment, we investigate whether replacement of fossil fuel by wood energy brings economic benefit to a user and local economy using input-output analysis. Our overall findings demonstrated that the use of wood energy under underutilized situations can lead to an increase of implementations of FMPs and of domestic wood resource supplies from a short-term perspective that comes from residues of the FMPs. We also found that wood energy consumption introduces co-benefits in terms of reduced heating costs for users and a larger economic impact on the local economy than fossil fuel.